Trade setup: 12,023-12,100 is make-or-break zone for Nifty

The domestic stock market recovered smartly on Tuesday after a deep cut in the previous session. NSE Nifty made a strong start and comfortably moved past the 12,100 level in the intraday trade. However, the index failed to sustain at higher levels and came off day’s high to end at 12,052.95, up 59.90 points or 0.50 per cent.

The headline index, which formed lower top and higher bottom on the daily chart, slipped below short-term 20-DMA, but held onto 50-DMA, which is at 12,023. At the same time, the breakout that Nifty achieved after it moved past 12,103 on a closing basis, has failed after it slipped below this level.

The 12,023-12,100 zone is now extremely crucial, which will decide the market trend in the coming sessions. Any slip below 50-DMA will infuse further weakness.


Wednesday’s session is likely to see a flat to a mildly negative start with 12,100 and 12,160 levels acting as resistance. Support may come in at 12,000 and 11,935. Any slip below 50-DMA on a closing basis will make trading range broader than usual.


The Relative Strength Index (RSI) on the daily chart stood at 47.36 and stayed neutral, showing no divergence against the price. The daily MACD was bearish and traded below its signal line. Only a black body was formed on the daily chart.

As per pattern analysis, Nifty’s breakout has failed, which it had achieved after moving past the double top resistance at 12,103. At present, the index is in a broadening formation, as it trades below short-term 20-DMA, but has held onto 50-DMA.

All in all, the market failing to pull back in a meaningful way even after a deep cut signals weakness. However, given the steep decline over the last few days, Nifty may see a technical pullback, but it may not sustain at higher levels.

Even if the market logs gains in the initial trade on Wednesday, they may get sold into at higher levels. The behaviour of Nifty against the 12,023-12,100 zone on a closing basis will be crucial to watch out for in the immediate short term. A cautious outlook is advised for the day.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)